Independent further development at SBB Cargo.

Press release, 04.02.2010

SBB's plans for shaping the strategic development of its railfreight business are taking on a more concrete form. International block-train services on the transalpine transit routes are to be spun off into a separate company, with the goal of reducing production costs through leaner structures. In the Swiss wagonload segment, SBB Cargo wants to provide more standardised services and tailor its offering more closely to its customers’ needs. Decisions on the precise implementation of these plans will be taken during the summer.

By deciding to separate SBB Cargo into two distinct business areas, SBB has laid the foundations for the future strategic direction of its railfreight business. In doing so, it is empowering SBB Cargo to shape the company’s long-term future. With this new strategic thrust, SBB Cargo will meet its customers' justified demands for a reliable, future-oriented partner. Implementation of the decisions on the company's further development will require significant steps to reduce costs and improve the financial result.

In the Swiss wagonload freight segment, SBB Cargo will continue to operate a complete product portfolio covering individual wagons, wagon groups and block trains within Switzerland. As well as a dense network, the company’s strengths include its close logistical dovetailing with major customers – an area which is due to be enhanced by even better structures and future expansion. The goal is to improve competitiveness by standardising and optimising a network geared to the shipping industry and featuring central hubs. Furthermore, user-based charges will be applied to additional services.

On this basis, optimisations will be undertaken where necessary in order to secure a level of service that not only offers reliability for customers but also ensures that SBB Cargo’s costs are covered. If there are significant cases in which no mutually acceptable solution can be found, it will be left to the Confederation to decide whether a subsidy is justified.

The search for such workable solutions will certainly require many individual discussions and take several years. Based on current plans, the company is targeting a positive result in its Swiss wagonload business by the end of 2013 which would also cover the necessary reinvestment in rolling stock plus financing costs.

As wagonload freight is highly dependent on import and export shipments, primarily between Switzerland and Germany, Italy and France, these freight volumes will be secured through bilateral cooperation agreements with DB, SNCF and other partners. Standards for quality and punctuality will be agreed upon to ensure competitiveness, and there are also plans to improve the quality of shipment services provided by X-Rail, an alliance of seven European railfreight providers, thus strengthening railfreight's competitive position in relation to road haulage.

A secure, favourable and stable operating environment (including the ban on night-time truck movements, along with railfreight subsidies and regulation of train-path prices) is another requirement for the success of this new strategic thrust, as is the securing of the necessary infrastructure capacity (train-path availability) even during peak operating times.

Cost leadership for transit services.

For international block train services – and particularly the haulage of standard and interchangeable containers – SBB Cargo is to concentrate in future on developing its role as a traction provider on the north-south corridor between the North Sea ports and northern Italy. On an international level, intermodal freight in particular is seen as a long-term growth market, but margins will remain low. The aim is therefore to operate a lean international railfreight business which, thanks to its cost leadership, is economically viable but still upholds Swiss quality standards. This continued development is necessary to secure the company's involvement on the central European freight corridor in future, where it will be able to make a significant contribution to the transfer of freight from road to rail.

Rail operations include intermodal traction services on the north-south corridor and haulage of block trains closely linked to this corridor (principally transit and import/export services to and from Switzerland).

A separate company for international operations.

As the strategy of independent further development for SBB Cargo was elaborated, it became clear that the Swiss domestic wagonload and International business areas should continue developing quite separately in structural terms. The intermodal market on the international North-South corridor is a low-margin «linear» business, whereas wagonload freight is based on a complex network. The structure of the International business area will be rapidly simplified.

SBB Cargo's International unit will thus be spun off into a separate company, with the goal of ensuring cost leadership and lean processes and structures, as well as a simplified IT system. It has not yet been decided where the new company will be based. Discussions regarding a share in the new company are currently ongoing with the Swiss intermodal operator Hupac, based in Chiasso. The possibilities of SBB Cargo's subsidiaries in Germany and Italy being integrated into the new company are also being investigated.

Headcount reductions to be expected – decisions to follow in the summer.

SBB Cargo's independent further development will lead to a restructuring of the company. Although this process is sure to involve headcount reductions, it will be organised in a socially responsible manner. SBB will offer alternatives for retraining within the rest of the company, and can offer new employment opportunities thanks to strong growth in other areas. The best possible use will be made of all available solutions throughout the Group’s employment market, including offers to work in other SBB divisions, exploiting staff turnover, early retirement opportunities and, where appropriate, out-placement (including via the NOA re-training and employment programme). The individual strategic thrusts will be finalised in the coming months. Decisions on how these are to be implemented will be taken during the summer.